n ISSN 1540-2711 n
n ISBN 1-55871-541-X n
List of Figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi
Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . x
About the Authors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .xi
Executive Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xii
Chapter 6: HR Activities
Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
Highlights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
Changes in HR Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
Employment and Recruiting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
Behind the Numbers: Activities and Workforce Size. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
Strategic Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
Training and Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
Employee Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136
Employee Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
Perspective: Several Factors Drive Decisions on Performing HR Activities. . . . . . . . . . . . . 141
External Relations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142
Personnel / HR Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144
Health and Safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
Appendix
Survey Instrument . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149
List of Figures
Figure 3-1a Per Capita HR Expenditures Budgeted for 2006 by Workforce Size. . . . . 43
Figure 3-1b Per Capita HR Expenditures Budgeted for 2006 by Workforce Size. . . . . 43
Figure 3-2a Per Capita HR Expenditures Budgeted for 2006 by Industry. . . . . . . . . . 44
Figure 3-2b Per Capita HR Expenditures Budgeted for 2006 by Industry. . . . . . . . . . 45
Figure 3-3 Per Capita HR Expenditures by HR Activity Load. . . . . . . . . . . . . . . . . . . 46
Figure 3-4 Median Per Capita HR Expenditures Adjusted for Activity Load Level . . . 46
Figure 3-5 Median Per Capita HR Expenditures for 2006 by Organization Level . . . 47
Figure 3-6 Median Budgeted Changes in HR Expenditures: 1996-2006. . . . . . . . . . 48
Figure 3-7 Budgeted Changes in Total HR Expenditures: 2005 versus 2006. . . . . . . 49
Figure 3-8 Budgeted Changes in Total HR Expenditures: 2005 versus 2006. . . . . . . 49
Figure 3-9 HR Budget as a Percentage of Total Operating Costs: 1996-2006 . . . . . 51
Figure 3-10a HR Budget as a Percentage of Total Operating Cost
by Workforce Size . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Figure 3-10b HR Budget as a Percentage of Total Operating Cost
by Workforce Size . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Figure 3-11a HR Budget as a Percentage of Total Operating Cost by Industry. . . . . . . 53
Figure 3-11b HR Budget as a Percentage of Total Operating Cost by Industry. . . . . . . 54
Figure 3-12 HR Budget as a Percent of Total Operating Cost
by Reporting Relationship of HR Executive . . . . . . . . . . . . . . . . . . . . . . . 56
Figure 3-13 Per Capita HR Expenditure
by Reporting Relationship of HR Executive . . . . . . . . . . . . . . . . . . . . . . . 57
Figure 3-14 Median Per Capita HR Expenditures:
“With” versus “Without” Contingent Workers. . . . . . . . . . . . . . . . . . . . 57
Figure 3-15 HR Salary Ratio versus HR Staff Ratio: 1996-2006. . . . . . . . . . . . . . . . . . . 59
Figure 3-16 HR Staff Salaries as Percentage of Total Salaries . . . . . . . . . . . . . . . . . . . 60
Figure 3-17 Change in Median Staff Salaries: 1996-2006. . . . . . . . . . . . . . . . . . . . . . 61
Figure 3-18 Projected Changes in 2007 Budget Allocation . . . . . . . . . . . . . . . . . . . . 63
Figure 3-19 HR Technology and Budget Allocations by Workforce Size . . . . . . . . . . . 65
Figure 3-20 HR Technology and Budget Allocations by Industry . . . . . . . . . . . . . . . . 65
Acknowledgements
Thank you to the members of our expert Advisory Group for your time, thoughtful
comments, and willingness to collaborate with us on the 2007 HR Department Benchmarks
and Analysis Survey and report. Your insights, critiques, and encouragement added
substantially to this effort and to the final result.
The data collection effort for the Survey — including programming and Web hosting — was
managed and conducted by IntelliSurvey, Inc. They provided the highest level of quality and
service, while developing a product that fulfilled all our requirements. A special thanks to
Michael Endres and Jonathan Ephram.
Laura Lloyd-Henry of design25 graphics pulled it all together beautifully, designing and
laying out the report with patience and thoughtfulness.
And, finally, our special thanks to the HR executives who participated in this survey. It was
their cooperation in taking this somewhat lengthy and comprehensive survey, despite their
busy schedules, that made this report possible.
Overview
As it has for over two decades, HR Department Benchmarks and Analysis 2007 focuses on both
traditional HR functions and emerging issues in HR staffing, expenditures, measurement,
outsourcing, and related areas. Beyond providing respected metrics and analysis in these
areas, the report identifies factors that are actionably linked to more positive outcomes in HR
and organization wide.
Objectives
The report aims to help HR professionals use data more effectively, thereby enhancing
contributions to organizational success. To aid in these efforts, metrics are clearly defined,
results are rigorously analyzed, and their importance is discussed in the context of other
survey findings, examples, and commentary from outside experts.
The analysis and discussion of findings from the 2007 report help to inform important HR
decisions and answer practical questions such as:
n What are the normal ranges for key HR staffing and expenditure metrics and how do
industry, workforce size, and other factors affect benchmark comparisons?
n How does responsibility for hiring and processing contingent workers affect HR
department staffing and budget numbers?
n How can HR departments get greater value from their information systems?
n Under what conditions do organizations bring outsourced activities back in house and
what steps should be taken when outsourcing initiatives “go bad?”
To help readers more easily find and use information in this report, the remainder of this
chapter summarizes (1) report features, (2) organization of chapters, (3) frequently used
terms, (4) the survey methodology, and (5) demographics of participating employers.
Report Features
HR Department Benchmarks and Analysis 2007 has a number of features that make the
research results both useful and easy to access. These include:
n Accessible metrics. To insure accurate benchmarking to the reports metrics, each chapter
has select pages that give the essential details of “How It’s Measured.”
n Clear organization. Each chapter begins with an overview and highlights of key findings.
Sidebars and notes in the text identify related information in other chapters.
n Focused perspective articles. Under the guidance of our research staff, seasoned BNA
reporters interview experts and thought leaders on topics that complement the survey
results. This year’s perspective articles focus on effective benchmarking, getting more out
of HRIS technology, and addressing sub-par outsourcing initiatives.
n Demographic profile of participating organizations. To provide added context for the survey
results, we summarize the demographics of surveyed employers. Categories include
industry, workforce size, annual revenues (or operating budget in the case of nonprofits),
geographic region, union representation, and more.
n Complete question set. Unlike many reports, we provide a copy of the full survey used to
collect the data. Users of the report can reference the survey instrument to see exactly
how questions were asked, allowing greater insight into the results.
n Vetted survey questions and results. The survey questions were reviewed and the report
findings were vetted with the help of a volunteer panel of HR experts. The panel
consisted of HR vice presidents at leading organizations, respected researchers, heads of
HR institutes, and recognized consultants in the field 1.
1
Please see Acknowledgements for a complete list of advisors.
Following this introductory chapter, the 2007 report is organized into five additional
chapters that address the following topics:
n Chapter 2 looks at HR department staffing. BNA’s staffing ratio metrics are presented
along with current-year data, breakouts by workforce size and industry, and related
analyses (e.g., global HR, use of contingent workers). Additional analyses focus on HR
staff composition and the use of specialists.
n Chapter 3 examines HR budgets and expenditures. Key budget metrics assess HR costs
per employee, HR expenditures as a percentage of total operating costs, HR salary ratios,
and more. The chapter also looks at spending on HR technology and how to get more
value from these investments.
n Chapter 5 first addresses broad trends in outsourcing and highlights activities that are
most often outsourced by HR departments. The remainder of the chapter looks in detail
at outsourcing of benefits and employee services activities, factors that affect outsourcing
success, and steps to take when outsourcing initiatives sour.
n Chapter 6 examines the core competencies and activities of human resource departments
overall and by workforce size.
Each chapter begins with a brief overview and summary of key findings. The results are
organized into clearly labeled sections, with major findings always summarized in bold,
followed by more detailed descriptions and graphics, where appropriate. We consistently
report demographic breakouts by industry and workforce size wherever these results provide
meaningful information.
Some terms in the report may not be immediately familiar or may have a specific meaning
within the context of this research. These include:
Median
The median is the exact mid-point or middle value within a set of numbers. This means
half the numbers in a set will fall above the median and the other half below it. We use the
median rather than the mean or average value when reporting most survey findings because it
helps ensure that a few extreme responses do not artificially distort the results.
Industry
The three broad industry groups used in this report are manufacturing, services/
nonmanufacturing, and nonbusiness.
The nonbusiness sector includes organizations involved in health care, local government,
federal and state government, education, social services, and religious causes.
HR Department Level
HR departments can operate at any or all of three levels within an organization. HR
departments at the corporate level serve all employees in the organization by developing
company-wide HR policies and programs; division-level HR departments serve employees
at a divisional, regional, or group level; and HR departments at the facility level serve
employees at a single facility within a larger company.
HR Specialist
The survey defines a human resource specialist as a non-clerical employee who works
exclusively in one or two areas of human resources that require professional expertise.
Contingent Worker
A contingent worker is a temporary employee, such as contractor, intern, or casual
worker, usually working under contract for a fixed period of time or on a specified project.
Contingent workers typically do not receive the benefits or job security accorded employees
on an organization’s regular payroll.
n This year’s Web-based survey was conducted between the dates of June 9, 2006 and
July 26, 2006. Eligible survey participants were human resource executives and managers
working for organizations with a separate HR function and a minimum headcount of at
least 25 employees. A total of 550 respondents completed the survey and provided usable
data.
n Respondents to the survey represent a cross section of U.S. employers. The participants
were drawn from three primary sources. A sample of 9,367 names from BNA’s existing
HR survey panel and subscriber lists was combined with a sample of about 11,000 HR
professionals from the member lists of Kennedy Information, a BNA subsidiary. To help
ensure a representative sample of participants, a postcard invitation was also sent to a
sample of 9,000 HR executives drawn from the Directory of Corporate Affiliations.
n The survey included a series of screening questions to help ensure that only eligible
participants — those with substantial familiarity and responsibility for HR department
staffing, budgets, and outsourcing decisions — were selected.
n The survey was conducted on a secure site and several reminders were sent over the
eight-week survey period. As an incentive to participate, respondents were promised free
access to the survey results.
n Several steps were taken to assure survey participants that their responses would remain
confidential. First, as noted above, the survey was hosted on a secure Web site to make
sure that information submitted by respondents — particularly sensitive information
— could not be observed by third parties while in transit. Respondents were also assured
that no information identifying individual respondents or their organizations would be
used. Only aggregate data were analyzed and reported in the survey results.
2
See Profile of Participating Organizations for demographic breakout by HR level.
3
While survey responses sometimes differ by HR level, such differences tend to be highly correlated with workforce size.
Because we consistently report findings by workforce size in the survey, we chose not to report very similar findings by HR
level.
n The number respondents reported in the analysis in different sections of the report does
not always equal the total of 550. The main reason is that some respondents were not
eligible to complete particular sections. For example, only HR departments with separate
budgets answered the HR expenditures questions (Chapter 3), while only those that
outsourced particular activities answered the outsourcing questions (Chapter 5). Finally,
because the survey is comprehensive and time consuming, some participants completed
most but not all sections.
n To simplify the presentation of figures in this report, we typically show only the overall
number of respondents (N) that provided data for each of survey sections. For some
analyses shown in the report, the actual number of valid responses will be smaller
than the stated N due to missing data or skip patterns in the survey. Additionally,
the percentages for figures in the report do not always add up to 100 percent due to
rounding.
n Because many of the questions asked in this year’s survey were also asked in previous
years, comparisons to survey findings from prior years are presented where appropriate
throughout this report.
Workforce size, industry, and various other factors can affect how HR departments operate
and approach their responsibilities. The summary profile of participating organizations
presented below provides added context for interpreting the survey results.
Industry
Manufacturing . . . . . . . . . . . . . . . . . . . . . . . 25%
Basic manufacturing . . . . . . . . . . . . . . . . . . . . 6%
Intermediate manufacturing . . . . . . . . . . . . . .9%
Advanced manufacturing . . . . . . . . . . . . . . . . 9%
Other manufacturing. . . . . . . . . . . . . . . . . . . .1%
Services/Nonmanufacturing . . . . . . . . . . . . 42%
Retail and wholesale trade. . . . . . . . . . . . . . . .4%
Finance, insurance, banking
and real estate. . . . . . . . . . . . . . . . . . . . . . . 11%
Business, personal
and miscellaneous services. . . . . . . . . . . . . 11%
Communications and information services. . . 8%
Transportation, warehousing and utilities . . . 5%
Other Services. . . . . . . . . . . . . . . . . . . . . . . . . 3%
Nonbusiness . . . . . . . . . . . . . . . . . . . . . . . . . 33%
Health care. . . . . . . . . . . . . . . . . . . . . . . . . . .14%
Government. . . . . . . . . . . . . . . . . . . . . . . . . . . 7%
Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4%
Associations, social services
and other nonprofits. . . . . . . . . . . . . . . . . . . 7%
Other nonbusiness . . . . . . . . . . . . . . . . . . . . . 1%
Yes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27%
No. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73%
Level of HR Department
Union Representation
Yes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26%
No. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74%
Yes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33%
No. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67%
Yes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49%
No. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51%
Yes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37%
No. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58%
Don’t know . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5%